Equity Research Report

August 28, 2015

BSE CODE: 500183

Himachal Futuristic Communication Ltd NSE CODE: HFCL
SECTOR: TELECOM- EQUIPMENT

CMP: Rs 13.19
Recommendation : BUY
Target Price : Rs 25
Target Period: 12 Months

Stock Details
Market Cap Rs 1629.78 Crore
52- wk HI/L Rs 24.30 Rs 9.10
Avg.Volume (Monthly) 3638075.23 About
Face Value Rs 10 Himachal Futuristic Communications Ltd (HFCL) was incorporated on

Historical Prices May 11, 1987. HFCL is one of the largest telecom equipment suppliers of
1 week 1 month 3 month 6 month 1 year transmission equipment, terminal equipment, access equipment and fibre
BSE 14.76 12.97 12.47 15.45 12.98
optic cable in India. The company is also providing Turnkey services to
Gain/Loss -10.57% 1.77% 5.85% -14.5% 1.69%
NSE 14.75 12.95 12.50 15.45 13.00 various operators and large multinationals operating in the country. Their
Gain/Loss -10.85% 1.54% 5.2% -14.8% 1.15% manufacturing facilities are located at Solan in Himachal Pradesh, Salcete
in Goa and New Delhi.
The company started with manufacturing transmission Equipment and
Revenue (Rs Crore) soon they expanded their product portfolio to manufacture Access
2,500.0 2,018.8 Equipment, Optical Fibre Cable, Accessories and Terminal Equipment.
2,000.0
1,500.0 The company is geared up for meeting the new generation access network
1,000.0 605.4
311.4 260.7
demand in future. The company was incorporated in the State of Himachal
500.0 86.4
0.0 Pradesh and was promoted by Deepak Malhotra, Mahendra Nahata and
Sep'10 Mar'11 Mar'12 Mar'13 Mar'14
Vinay Maloo. The company entered into a technical collaboration
EBIDTA (Rs Crore) agreement with Seiscor Technologies Inc, USA, for the manufacture of
400.0 1+1 and 1+7 Analog Subscriber Carrier Systems and signed a
156.3 200.5
200.0 60.1 98.7
Memorandum of Undertaking with Philips Kommunikation Industries AG
0.0

-200.0
Sep'10 Mar'11 Mar'12 Mar'13 Mar'14 of Germany for the manufacture of the Digital Subscriber Carrier System.
-400.0 Financial Highlights
-364.0
Companys standalone operating profit margin jumps to Rs.186.8
Crore in FY14 against Rs.82.59 Crore in the corresponding period of
Profit after Tax (Rs Crore) previous year.
300.0
200.0 147.5
189.9
Revenue for the quarter rose by more than 300% to Rs.2019 Crore
54.8
100.0 11.4
0.0
from Rs.605 Crore, when compared with the prior year period.
Sep'10 Mar'11 Mar'12 Mar'13 Mar'14
-100.0
EBITDA was at Rs. 200.5 Crore in Q4 FY14 as against Rs. 98.7
-200.0
-300.0 -221.1 Crore in the corresponding period of the previous year showing
growth of 103%.

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 Equity Research Report
August 28, 2015

Himachal Futuristic Communication Ltd

Investment Rationale
Mar Mar Mar
Ratio Analysis (Standalone)
'14 '13 '12
HFCL has touched new milestones with highest revenue ever Rs 2019
Investment Valuation Ratios
Crore showing growth of 300%. The net profit of the company has risen to
Face Value 10.00 10.00 10.00
Dividend Per Share 2.20 2.00 2.00 169% as compared to previous year. Returns to stakeholders have
Operating Profit Per Share (Rs) 52.23 42.82 41.65 strengthened where EPS grew to Rs. 1.15 against Rs. 0.40 in the previous
Net Operating Profit Per Share (Rs) 237.3 222.8 212.45 year. The returns on equity as well as the return on Capital employed have
Profitability Ratios
more than doubled to 17% over the previous year and during the year,
Operating Profit Margin(%) 22.00 19.25 19.60
HFCL enhanced its debt to equity ratio to 0.32 that provides healthy
PBIT(%) 18.36 15.55 15.72
Gross Profit Margin(%) 18.44 15.59 15.74 financial position and increased balance sheet flexibility. The key
Cash Profit Margin(%) 12.36 10.26 11.11 initiatives that led to the outstanding performance of HFCL and would
Adjusted Cash Margin(%) 12.36 10.26 11.11 remain the focus to maintain high growth trajectory include:
Net Profit Margin(%) 7.71 5.22 5.40
Adjusted Net Profit Margin(%) 7.67 5.21 5.40 Turnkey projects for setting up OFC infrastructure networks
Return On Capital Employed(%) 22.37 16.92 15.67 System integrator for setting up broadband optical transmission
Return On Net Worth(%) 23.77 13.52 10.76
networks
Adjusted Return on Net Worth(%) 27.33 17.12 14.47
ROA Excluding Revaluations 6.12 5.09 4.65 Fiber to the Home (FTTH) network implementation
ROA Including Revaluations 6.12 5.09 4.65 Manufacturing of OFC, Optical transport equipment, FTTH
Return on Long Term Funds(%) 17.68 10.05 5.83 equipment, rural GSM equipment, IP broadband radio, 2G and
Liquidity And Solvency Ratios 3G repeaters
Current Ratio 1.75 2.23 0.72
In telecom industry, the modernization of Indian defense telecom network,
Quick Ratio 1.87 3.12 0.81
Debt Equity Ratio 0.46 0.56 0.69 involving creation of pan India high capacity transport network, is going to
Long Term Debt Equity Ratio 0.35 0.45 0.52 provide business opportunities in rollout of turnkey OFC network and
Debt Coverage Ratios turnkey system integration projects. With increased nationwide emphasis
Interest Cover 5.45 3.38 1.52 on security and surveillance, HFCL expects the sizable orders out of this
Total Debt to Owners Fund 0.46 0.56 0.69
opportunity. HFCL are competent to address city surveillance projects as
Financial Charges Coverage Ratio 6.05 3.99 1.97
such projects are designed around citywide OFC networks, the core of
Management Efficiency Ratios
Inventory Turnover Ratio 13.46 18.48 8.10 competence of HFCL.
Debtors Turnover Ratio 7.28 1.98 0.81
Asset Turnover Ratio 1.93 0.62 0.26 Currently, the FDI policy in India for the telecom sector is liberal and
No.of Days In Working Capital 88.40 285.8 -178.4 investor friendly, which has led to continuous investment in the telecom
Cash Flow Indicator Ratios sector in India FDI upto 100% is allowed in almost all telecom services
AdjustedCash Flow Times 1.61 3.37 9.69 and manufacturing of telecom equipment. With the rapid growth in
Earnings Per Share 1.05 0.44 0.09
teledensity there has been a vast growth in the network infrastructure in
Book Value 6.12 5.09 4.65
India. Currently, India spends around Rs. 50,000 crore every year on
telecom infrastructure and equipment of which close to 90% is imported.
This concludes to the good growth perspective for HFCL.

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 Equity Research Report
August 28, 2015

Himachal Futuristic Communication Ltd

Balance Sheet (INR Crores) Technical Outlook

Consolidated
Source of Funds Mar14 Mar13
204.44 204.44 HFCL 12 month Stock Performance
Total Share Capital
Equity Share Capital 123.94 123.94
Preference Share Capital 80.50 80.50
Reserves 429.92 -25.21
Networth 634.36 179.23
Secured Loans 216.71 269.15
Unsecured Loans 83.03 89.48
Total Debt 299.74 358.63
Total Liabilities 934.10 537.86

Application Of Funds Mar14 Mar13

HFCL Performance Against Nifty
Gross Block 618.31 564.11
Less: Accum. Depreciation 387.97 381.29
Net Block 230.34 182.82
Capital Work in Progress 0.54 21.74
Investments 313.19 310.45
Inventories 150.06 32.82
Sundry Debtors 281.45 356.76
Cash and Bank Balance 95.20 49.42
Total Current Assets 526.71 439.00
Loans and Advances 578.76 292.71
Fixed Deposits 0.00 0.00
Total CA, Loans & Advances 1,105.47 731.71
Peer Analysis
Current Liabilities 672.02 692.86
Provisions 43.42 16.00 Name Last Market Sales(Cr) Net Total
715.44 708.86 Price Cap.(Rs) Profit Assets
Total CL & Provisions
Bharti Infratel 391.10 74,167.36 5,388.90 2,725.20 17,963.50
Net Current Assets 390.03 22.85
Honeywell Autom 8,750.00 7,736.33 2,403.67 114.20 881.87
Total Assets 934.10 537.86
HFCL 13.30 1,648.37 2,551.08 189.91 1,108.26
Contingent Liabilities 107.74 86.93
Astra Microwave 111.45 911.94 634.34 60.73 369.10
Book Value (Rs) 4.47 0.80
ITI 24.10 694.08 574.33 -297.13 1,694.73
GTL Infra 2.50 581.29 599.65 -514.71 5,903.33
MIC Electronics 23.15 301.69 158.54 2.20 396.42
GTL 11.15 175.39 2,069.41 -801.29 3,139.34
NELCO 60.00 136.91 102.77 1.29 72.86
Kavveri Telecom 15.70 31.60 2.32 -27.31 262.32

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 Equity Research Report
August 28, 2015

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